What factors led to the Dubai economic crisis?

gtho4

o real estate bubble o too much debt o speculative construction o too much too fast o banks stopped lending o unemployment o take your pick Dubai's six-year building boom grinds to halt as financial crisis takes hold A six-year boom that turned sand dunes into a glittering metropolis, creating the world's tallest building, its biggest shopping mall and, some say, a shrine to unbridled capitalism, is grinding to a halt. Dubai, one of seven states that make up the United Arab Emirates (UAE), is in crisis. So too are British expatriates. Many of the estimated 100,000-strong community came here expecting to make millions in property, and to soak up a lavish lifestyle living alongside footballers, actors and supermodels. But the real estate bubble that propelled the frenetic expansion of Dubai on the back of borrowed cash and speculative investment, has burst. Many westerners are being made redundant or absconding before the strict legal system catches up with them. Half of all the UAE's construction projects, totalling $582bn (£400bn), have either been put on hold or cancelled, leaving a trail of half-built towers on the outskirts of the city stretching into the desert. Among the casualties is the tower Donald Trump promised would be "the ultimate in luxury", a $100bnresort complex by the beach, and four huge theme parks and an artificial island developed by the state company Nakheel. It is not all bad news: the building projects still in play are almost the equivalent of the US stimulus package. And the city remains a haven for super-rich sheikhs, billionaire hedge fund managers and Russian oligarchs. But banks have stopped lending and the stock market has plunged 70%. Scrape beneath the surface of the fashion parades and VIP parties, and the evidence of economic slowdown are obvious. Luxury hotels are three-quarters empty. Shopkeepers in newly-built malls are reporting a drop in sales. In Dubai you expect to see a Ferrari parked beside a Rolls-Royce. But not, as is the case now, with scruffy For Sale signs taped to the windows. Living the dream Nowhere sums up the fortunes of expatriates in Dubai quite like Palm Jumeirah, an artificial island fanning out into the Persian Gulf, populated by residents including the likes of David Beckham, Michael Schumacher and even, it is said, Afghanistan's president, Hamid Karzai. At the top of the island stands the Atlantis, a garish $1.5bn hotel complex with 1,539 rooms and a whale shark swimming in a 1 million-litre fish tank. The Atlantis's $20m inauguration celebration, where the world's A-list celebrities were treated to 1.7 tonnes of lobster and 1,000 bottles of Veuve Clicquot, was promoted as the world's biggest party. For Palm residents, it was followed by an equally impressive hangover. The value of their villas and apartments on the Palm fell by as much as 60% in just a few months. "Drink your last cocktail and get out of here," said Sasha Reynolds, a 33-year-old airhostess. "My boyfriend is an engineer and work has dried up. He's been offered work in Qatar but who wants to go there? People are still making money here but the parties aren't quite the same. I'm lucky ‑ I didn't buy." The exact number of unemployed is not known. The Dubai government does not release figures, and prevents the press from running stories that damage the economy, such as mass redundancies. But there were sacked expatriates ‑ bankers, lawyers and architects ‑ in all but one of the hotel bars visited in Dubai this week. Employees who lose work in the UAE automatically have their visa rescinded, generally giving them 30 days to leave. "I look out of my balcony every day and I see Brits by the pool on their laptops," said Andrew Hillocks, 29, a sacked telecoms consultant whose passport has been seized. He will be escorted to the airport next week. "They're looking for work that just isn't there. I sold my car to cover my loan, but other people are panicking." Under Dubai's strict legal code defaulting on debt or bouncing a cheque is punishable with jail. Any expatriate in financial difficulty knows the safest bet is to take the next outbound flight. At the airport, hundreds of cars have apparently been abandoned in recent weeks. Keys are left in the ignition and maxed out credit cards and apology letters in the glove box. http://www.guardian.co.uk/world/2009/feb/13/dubai-boom-halt Apr 09 10, 2:30 AM

shawn888

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